FIGS reports strong growth, expansion plans, and new product launches, projecting positive outlook.

From Nasdaq: 2025-02-27 21:30:16

FIGS (NYSE: FIGS) hosted its Q4 2024 Earnings Call on Feb 27, 2025, revealing impressive results. The company reported significant growth, with Trina Spear, the CEO, and Sarah Oughtred, the CFO, discussing the findings. FIGS also addressed the impact of recent wildfires in Los Angeles, highlighting the support provided to healthcare workers affected by the crisis. The company showcased its commitment to developing innovative products, building authentic connections, and expanding its global reach. This dedication has led to notable achievements, including partnerships with brands like New Balance and Eko, and expansion into 10 new countries in 2024. A second community hub has opened in Philadelphia as part of an evolving B2B teams platform, offering a full range of products and new solutions like a gifting platform. Revenues grew 5% year over year in Q4, with positive signs that strategies are working, including repeat frequency, impactful product launches, and international business growth of 45%. Despite challenges throughout the year, the company saw record revenue in 2024 and looks to normalize post-COVID. Moving forward, the focus is on prioritizing long-term brand health through calibrations in promotional positioning, fit standardization, and a pause in opening a Canadian DC. FIGS is shifting its marketing approach to focus on showcasing everyday moments of healthcare professionals, emphasizing customization and personalization. With plans to expand internationally, FIGS is targeting markets in Asia, like Japan and South Korea, and investing in technology to deepen connections globally. The company is also introducing new retail stores and leveraging its minority investment in OGG, an AI-powered education platform for healthcare professionals. With a strong balance sheet, FIGS is prioritizing investments to accelerate growth, supported by new leadership hires like Jon Tam and Michelle Armstrong. The company has welcomed new team members and emphasized its commitment to innovation, community building, and global growth. In the fourth quarter, net revenues rose 5% to $151.8 million, driven by strong customer traffic and purchase frequency. Scrubwear accounted for 76% of net revenues, with limited edition and core styles performing well. Gross margin contracted to 67.3%, but adjusted EBITDA for Q4 was $21.1 million. Full-year net revenue hit a record $555.6 million, with an adjusted EBITDA margin of 9.3%. The company ended the year with $245.1 million in cash, cash equivalents, and short-term investments, as well as no debt. In 2025, inventory growth is expected to outpace revenue growth, with $38.2 million in shares repurchased and $4.6 million remaining for repurchase. Promotions will be reduced, impacting net revenues, with Q1 expected to be flat. Gross margins are expected to remain flat, with SG&A leverage and lower stock-based compensation. Adjusted EBITDA margins for the year are projected to be between 9% to 9.5%. A $50 million share repurchase program has been authorized. Investments will support growth and future momentum, prioritizing top-line drivers and margin tailwinds.ongoing optionality for shareholder value over time. FIGS, a medical apparel company, discusses plans to reengage lapsed customers and address lower new customer acquisition trends due to promotional adjustments. Investments in brand awareness and customer retention are key strategies for growth in 2025. The company aims to optimize current distribution facilities for supply chain improvements, pausing Canadian distribution center investment for now. Despite strong fourth-quarter performance, softer Black Friday/Cyber Monday sales impact 2025 guidance, reflecting headwinds in active customer growth and promotional shifts. Long-term growth plans focus on revitalizing the U.S. business and active customer base to drive top-line expansion and bottom-line costs leverage. In a recent earnings call, CFO Sarah Oughtred discussed the impact of transitory costs related to a distribution center transition this year, which should normalize into next year. The company expects some leverage year over year, but there are added costs related to operating a new facility. Marketing investments will be reinvested to drive top-line growth, while stock-based compensation will decrease by $13 million year over year. International and non-scrubwear categories are profitable for the company. The company has minimal direct exposure to China on finished goods, with immaterial exposure to current tariff plans.

During the call, Trina Spear, Co-Founder and CEO, highlighted the success of new product launches like the Isabel wide leg and scrub legging. The company is focusing on building fabric platforms across categories and testing new products while doubling down on what’s working. The goal for 2025 is to continue innovation, execution, and balance between the two. Dana Telsey of Telsey Group also inquired about reactivating customers and tariff preparations, to which the executives provided insights on repeat frequency and minimal exposure to China tariffs. The company plans to shift promotional focus to strategic promos celebrating healthcare professionals and custom strategies. They have made progress in reducing inventory, leading to improved inventory positions. Scrubwear demand is expected to decline, but overall customer engagement is increasing. Non-scrubwear proportion is increasing each year, moving towards an 80-20 split. Gross margins are expected to be impacted by the shift in product mix. The company is focusing on sizing initiatives to drive growth in the future. The company is delaying the transition to new sizing until the second half of 2025 to ensure the fit is correct for healthcare professionals of all sizes. Despite the delay, the decision is seen as the right move to ensure the new sizing is accurate for both new and existing customers.

In Q3, the company saw a quick recovery in the non-scrubwear category, specifically in footwear. The return of footwear penetration, along with successful launches in loungewear, led to outperformance in the quarter. The company expects a higher proportion of non-scrubwear in Q4, with exciting new launches in footwear planned for the future.

The company’s average order value (AOV) was down 1% in the quarter, the smallest decline rate of 2024. Despite declining revenue per customer, there is optimism around increased frequency of purchases from existing customers. Inventory levels have improved, down 35% from highs, with a focus on disciplined buying and exiting slow-moving inventory. Inventory growth is expected to exceed revenue expectations moderately. FIGS, a medical apparel company, discussed their EBITDA margin projections for the year during a recent conference call. They anticipate the lowest margin in the first quarter, with improvements in the following quarters. The highest EBITDA margin is expected in the fourth quarter. Various analysts participated in the call, including those from Barclays. The information provided in the call transcript was produced by The Motley Fool, with a disclaimer about potential errors or inaccuracies. The Motley Fool has no position in any of the stocks mentioned in the call.



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